Smart Contracts and Distributed Ledger – A Legal Perspective

Smart Contracts and Distributed Ledger – A Legal Perspective is a new whitepaper, co-authored and published today by the International Swaps and Derivatives Association (ISDA) and Linklaters.

Smart contracts and distributed ledger technology have the potential to transform how derivatives are executed and managed through the entire lifecycle - modernising the industry and bringing significant efficiencies and cost savings.

But these technologies are at a relatively early stage of development and there is still a lack of agreement on precisely what a smart contract is, what role it can play in the derivatives market, and how it might interact with existing legal standards and documentation. Could a smart contract ultimately replace an existing legal contract in its entirety, or will it only automate the execution of certain actions specified within a contract?

This paper sets out what smart contracts and DLT are, how they might be used in a derivatives context, and some of the legal issues that will need to be resolved. The full paper is available here.

"The ISDA Master Agreement is possibly the most successful legal contract of all time, but the advent of smart contracts offers the possibility for it to become even more powerful. This paper is the first step in considering how that can come about." Paul Lewis, Derivatives and Structured Products Partner at Linklaters

"A lot of work has been done by ISDA and its members to unlock value in the derivatives market by developing the operational building blocks for smart contracts – and the common data and process hierarchy work led by ISDA is critical to that. This work complements our development of smart-contract and broader governance structures utilizing the existing and proven legal foundation that ISDA has developed over the past 30 years. This paper explores where a smart contract can be applied to automate the execution of certain specified actions, and also where a broader governance framework for non-operational legal agreements can be applied to future-proof existing product definitions and legal documents." Scott O’Malia, ISDA Chief Executive